KUALA LUMPUR, Oct 21 — RHB Investment Bank Bhd has maintained Malaysia’s inflation rate forecast at -1.0 per cent in 2020, with a rebound to 2.0 per cent next year.
In a research note today, the investment bank said price pressure on the demand side should remain subdued given the weak economic momentum this year.
“For next year, we see support from vaccine deployment in mid-2021, which would lead to better demand and commodity price growth,” it said.
Earlier today, the Department of Statistics Malaysia (DoSM) announced that Malaysia’s inflation, as measured by the Consumer Price Index (CPI), slipped 1.4 per cent year-on-year to 120.1 in September against 121.8 in the same month last year, but was unchanged compared with August this year.
The DoSM attributed the decline mainly to the fall in transport (-9.9 per cent), housing, water, electricity, gas, and other fuels (-3.0 per cent), as well as clothing and footwear (-0.6 per cent), which contributed 41.6 per cent to the overall weighting.
RHB Investment Bank said the flattish oil prices kept transport CPI unchanged for September, which in turn kept headline CPI prices relatively stable.
On the downside, however, the outlook for the domestic economy appears dimmer as the country is returning to stricter social distancing measures.
“Amid the weakening domestic economy, demand-pull pressure could fall, leading to much weaker headline and core CPI growth,” it added.
Meanwhile, CGS-CIMB Equities Research said the subdued inflation implied that there remains sufficient headroom for monetary policy easing.
“We see the possibility of a 25-basis point reduction in the Overnight Policy Rate (OPR) by Bank Negara Malaysia on November 3, in reaction to the two-week Conditional Movement Control Order imposed in Selangor, Putrajaya, Kuala Lumpur, and Sabah, which we estimate to shave a further 0.18 per cent from the gross domestic product (GDP) for 2020.
“We reiterate our GDP forecast of -4.4 per cent this year,” the research house said. — Bernama
